The welfare state was founded on the idea of something for something – or rights and responsibilities, as Tony Blair put it. People contributed as well as received. If you were out of work you would do what you could to get ready for work and to get a job. David Cameron has argued that "it is not moral that people should be paid more in benefits than the average working family earns". Liam Byrne has also stressed that work should be the foundation for renewing the welfare state. In a crude way, the benefits cap is consistent with this principle, because the £26,000 watershed is linked to the average family's income from employment.

But the cap contravenes another fundamental principle of welfare reform, which is to target resources to those in need, according to their needs. This benefit cap is one-size-fits-all. It cannot capture all of the variety and complexity of our modern society. But ministers have decided that, in this case, the principles of responsibility and shared values are more important. On balance, it is right to draw a line, even if that is exceptionally hard to do.

The cap also seeks to save money. This is not contradictory to the principles of the welfare state. William Beveridge was clear that benefits had to be paid for (largely through contributions from work). The size of the fiscal deficit indicates that the budget has become unsustainable. Every major political party is committed to eliminating that deficit (albeit over different time frames) and all of them are looking at welfare spending. As the biggest budget, welfare cannot be immune from the drive to save money and get better value.

This is a change in the terms of the welfare debate, but it is a change in the right direction. We have become accustomed to the state providing services from a tax base that is shrinking relative to the demands made upon it. We expect to pay American levels of taxation and get Swedish standards, but the reality is that we get the opposite.

One of the government's other flagship reforms is the removal of child benefit from higher rate taxpayers. This policy needs redesigning from the ground up, but the principle is right – that welfare need not be universal and should instead be targeted at those people who actually need it.

Middle-class benefits have been used to attract votes, and higher income families have been encouraged to use the welfare state as an ATM while poor families were left with scraps. But if ministers are serious about targeting spending effectively, they must overturn this culture. Savings that could be made in this area dwarf savings that could be made elsewhere, and would enable more generous support for those genuinely in need.